Investment-Banking by pengxuezhi

VIEWS: 11 PAGES: 41

									Strategic Options for Mutuals and Stocks
An Investment Banking Update
October 15, 2003

Remarks of:
Ben A. Plotkin
Chairman & C.E.O.
Telephone: (973) 597-6025
Email: ben.plotkin@ryanbeck.com
                             The Mutual Structure

    The Declining Number of Mutuals

                                              As of October 6, 2003 there were 19 mutuals with over $1B in assets
2,500

        1,962
2,000           1,829
                        1,714
                             1,556
                                     1,447
1,500                                        1,330
                                                     1,161
                                                             940 905 887 864
1,000                                                                        829 747
                                                                                     719 706 679 663

 500


   0
          19

                  19

                          19

                                 19

                                        19

                                                19

                                                       19

                                                              19

                                                                     19

                                                                            19

                                                                                   19

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                                                                                                        20

                                                                                                               20

                                                                                                                      20

                                                                                                                              20
            87

                    88

                            89

                                   90

                                          91

                                                  92

                                                         93

                                                                94

                                                                       95

                                                                              96

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                                                                                            98

                                                                                                   99

                                                                                                          00

                                                                                                                 01

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                                                                                                                             Page 2
                     Strategic Alternatives for Mutuals



The choices:                           Advantages
                                       • no external pressures
                                       • lower returns on equity required
   Mutuality                          • quality of corporate life
                                       • focus remains solely on customers &
   MHC without Stock Issuance           employees
   MHC with Minority Stock Issuance
                                       Disadvantages
   Full Conversion                    • limited external growth possibilities
   Conversion with Acquisition        • valuation “clock” keeps running (fluctuating
                                         appraisal values – timing is an important
                                         factor)
                                       • lack of stock-oriented benefits to attract
                                         qualified people
                                       • regulatory uncertainty
                                       • No foundation to supplement community
                                         giving




                                                                                        Page 3
                     Strategic Alternatives



The choices:                           Advantages
                                       • ability to merge with institutions and keep
                                         them as a separate subsidiary
   Mutuality                          • formation process and proxy vote out of the
                                         way in the event rules change
   MHC without Stock Issuance         • able to raise capital such as trust preferred
   MHC with Minority Stock Issuance     as a middle-tier

   Full Conversion                    Disadvantages
   Conversion with Acquisition        • setup costs are a direct hit to P&L
                                       • proxy solicitation required – may have to
                                         obtain vote again when issuing stock
                                       • valuation “clock” keeps running
                                       • no stock incentive plans
                                       • no stock funded foundation




                                                                                         Page 4
                     Strategic Alternatives



The choices:                           Advantages
                                       • more attractive valuation than conventional
                                         conversion
   Mutuality                          • initially, higher returns than full conversion –
                                         less capital raised
   MHC without Stock Issuance         • growth flexibility
   MHC with Minority Stock Issuance   • valuation “clock” partially stopped
                                       • stock benefits to directors, management and
   Full Conversion                      employees
   Conversion with Acquisition        • able to make acquisitions with limits
                                       • establishment of a foundation, funded with
                                         conversion stock

                                       Disadvantages
                                       • less liquidity (stock “float”) and benefits than
                                         full conversion
                                       • conscious of “second step” implications
                                       • burdens of being a public company
                                       • increased financial reporting
                                       • benefit plan-related costs


                                                                                            Page 5
                     Strategic Alternatives



The choices:                           Advantages
                                       • facilitates mergers & acquisitions
                                       • more stock-oriented benefits
   Mutuality                          • increased stock liquidity
                                       • potential capital appreciation and dividends
   MHC without Stock Issuance         • valuation “clock” is stopped
   MHC with Minority Stock Issuance   • establishment of a fully funded foundation,
                                         funded with conversion stock
   Full Conversion
   Conversion with Acquisition        Disadvantages
                                       • overcapitalization creates need for more
                                         changes in business plan
                                       • external pressures
                                       • lower returns on equity
                                       • potential loss of control (short v. long-term)
                                       • burden of being a public company
                                       • less patient investors
                                       • increased financial reporting
                                       • benefit plan-related costs



                                                                                          Page 6
                     Strategic Alternatives



The choices:                           Advantages
                                       • Provides strategic rationale for conversion
                                       • increased stock liquidity
   Mutuality                          • potential capital appreciation and dividends
                                       • establishment of a foundation, funded with
   MHC without Stock Issuance           conversion stock
   MHC with Minority Stock Issuance   • higher ROE than standalone conversion

   Full Conversion                    Disadvantages
   Conversion with Acquisition        • external pressures
                                       • potential loss of control (short v. long-term)
                                       • burden of being a public company
                                       • non patient investors
                                       • increased financial reporting
                                       • benefit plan-related costs




                                                                                          Page 7
                    MHC Overview

The Enhanced MHC Structure –
A Unique Corporate Vehicle


 For an MHC, balancing different interests is paramount.


    Minority Shareholders                                  Depositors / Members

    WANT MANAGEMENT TO:                                WANT MANAGEMENT TO:
    Give them the best return on                       Preserve their subscription rights in
    their invested money.                              any subsequent conversion
                                                       transaction.
                                                       Preserve products and services
                                                       available.




                                                                                               Page 8
                                    MHC Overview

The Enhanced MHC Structure – A Unique Corporate Vehicle

The MHC as a Stepping Stone
    Optimize Timing of Offerings                                         Maximize 2nd Step Exchange Ratio
          Initial MHC offering when valuations are relatively low –              Reduce minority percentage through repurchases
            2nd step when valuations are relatively high                           while enhancing earnings
    Leverage Capital                                                     Utilize Dividend Waiver – if available
          Manage capital though internal and external growth, stock
            repurchases and dividends                                     Promote Market Sponsorship




              West Palm Beach, FL                                                                                   Paramus, NJ




         NASDAQ: FFFL                                                             NASDAQ: HCBK
         Initial MHC offering in January 1994 of 46%                              Initial MHC offering of $545 million in 1999
          and $27.6 million
                                                                                   Leveraging capital through aggressive
         Grew from $640 million to $1.9 billion and
          opened 15 new branches since 1994                                         buyback programs and dividends
         Raised $28.8 million in trust preferred securities                       Have bought back over 40 million shares
          to assist in their growth in 1998                                         and lowered their minority percentage to
         Completed a 2nd step transaction, raising                                 36% from 47%
          approximately $87 million; had a minority                                Appreciation of over 700% to date.
          exchange ratio of 2.4x




                                                                                                                                    Page 9
                               MHC Overview

The Enhanced MHC Structure – A Unique Corporate Vehicle

The MHC as a Safe Harbor
        Maximize majority control                 Initially, raise low % (20 – 30%)                  Waive dividends
        Maximize benefit plans                    High dividend yield                                Low market visibility




                  Warren, PA                                                                                       Bridgeport, CT



            NASDAQ: NWSB                                                                  NASDAQ: PBCT
            Initial MHC offering in 1994 of $69 million                                   Initial MHC offering of $62 million in 1988
             offering (30%)                                                                Have grown from $5.8 billion to $10.9 billion
            Have completed 6 bank acquisitions with 1                                      since IPO
             pending since its IPO                                                         Utilized convertible preferred securities to
            Repeatedly state intention of remaining in the                                 assist with growth
             MHC structure                                                                 Have completed several bank and non-
            Issued approximately $100 million in trust                                     depository acquisitions
             preferred offering conducted during 4th quarter                               Repeatedly state intention to never leave the
             2001                                                                           MHC structure
            Recently completed an “incremental” offering of
             $115 million to increase their minority percentage
             and raise additional capital


                                                                                                                                            Page 10
                            MHC Overview

The Enhanced MHC Structure – A Unique Corporate Vehicle

The MHC as an Acquisition Vehicle
       Mutuals have acquisition capacity to use when going public. This involves a simultaneous acquisition/demutualization
        transaction.
       The MHC structure allows the mutual to have this capacity twice. One opportunity in the initial MHC offering (example:
        Bank Mutual Corporation) and a second opportunity with the second-step offering (example: Waypoint Financial).




            Milwaukee, WI                                                                                Harrisburg, PA




       NASDAQ: BKMU                                                             NASDAQ: WYPT
       Simultaneously underwent initial MHC offering                            Simultaneously underwent a second
        while acquiring First Northern of Wisconsin                               step offering and acquisition of York
       Offered 30% of minority offering to depositors                            Federal in PA.
        and the remaining 49.9% to shareholders of                               Offered their majority % of 74% to
        First Northern                                                            depositors and was able to offer a
       The transaction was accounted for as a                                    portion of the remaining unsold
        purchase with 60% of the consideration in cash                            subscription shares to York
        and 40% in stock                                                          shareholders – “adjusted minimum”.
       Currently undergoing a 2nd step conversion to                            The transaction was completed as a
        convert to the fully public form of ownership                             pooling.




                                                                                                                                 Page 11
                                MHC Overview

The Enhanced MHC Structure – A Unique Corporate Vehicle
The Remutualization Transaction
   There is a unique opportunity for mutuals to acquire stock MHC's.
   The mutual acquiror pays only for the minority shares outstanding including all ESOP, MRP and Option shares. This allows the Mutual to
    pay a higher price per share than if it were required to pay for all of the shares of the company.
   Upon payment by the mutual for the minority shares, the MHC dissolves and their shares are cancelled. The entire institution becomes
    wholly-owned by the mutual.
   The acquired MHC’s depositors continue their ownership rights with the right to subscribe for stock if the acquiring mutual converts.
   In August of 2001, the first MHC Minority Acquisition was announced, wherein using the same concept as the re-mutualization, a stock MHC
    can acquire another stock MHC paying only for the minority shares outstanding, and the rights of the depositors get transferred to the
    surviving MHC.
   Recently, regulators have imposed severe limits on acquisition prices.



                Ridgewood, NJ                                                                                     Avenel, NJ




          Announced transaction with Provident                                          Announced transaction with NSB
           for $15.00 cash in Aug. 2000.                                                  Holding Corp. for $26.50 cash in May
          Received a competing offer from Boiling                                        2002.
           Springs for $18.00 per share.                                                 This represents a multiple to book value
          The Boiling Springs offer was deemed                                           of 275% , 24.8x LTM earnings and over
           superior and the transaction closed in                                         a 45% premium to market.
           June of 2001.                                                                 The transaction was completed on
                                                                                          December 31, 2002.



                                                                                                                                               Page 12
                     Summary of Simultaneous Transactions

 Simultaneous transactions can be done in tandem with all three forms of mutual to stock
  conversion:
        Stock Mutual Holding Company Formations;
        Full Conversions; and
        Second Step Conversions.


 There are a number of reasons that simultaneous conversions are attractive, some of
  the main reasons are:
        Provides immediate use of proceeds and gives a definite reason for the conversion to
         depositors, community and future shareholders;
        Less excess capital will give a boost to return on equity and earnings per share;
        Use of conversion stock in the consideration mix has tremendous value as currency for
         target companies – recent simultaneous deals have seen the targets accepting stock
         trading considerably above the acquisition price;
        Opportunities to offer benefit plans to management and employees of target company as
         “strategic” value in the consideration.


                                                                                          Page 13
                               Simultaneous Transactions
Conversion/Acquisition Transactions:

                                                     NASDAQ: Pending
                                                     Simultaneously undergoing a full conversion
                                                      and dual acquisition of Connecticut
                                                      Bankshares and Alliance of New England
                                                     Connecticut Bankshares transaction is for
                                                      100% cash, and Alliance transaction is for up
                                                      to 100% stock                                                     New Haven, CT

                                                     The transactions are expected to close
                                                      simultaneously in the first quarter of 2004



         Milwaukee, WI




    NASDAQ: BKMU                                                                                        NASDAQ: FNFG
    Simultaneously underwent initial MHC offering                                                       Simultaneously underwent a second step
     while acquiring First Northern of Wisconsin                                                          offering and acquisition of Finger Lakes
    Offered 30% of minority offering to depositors                                                       Bancorp in NY
     and the remaining 49.9% to shareholders of                                                          Offered their majority % of 61% to
     First Northern                                                                                       depositors and issued an additional 3.3
    The transaction was accounted for as a                           Lockport, NY                        million shares to Finger Lakes’
     purchase with 60% of the consideration in cash                                                       shareholders
     and 40% in stock                                                                                    The transaction was accounted for as a
    Currently undergoing a 2nd step conversion to                                                        purchase with 50% of the consideration in
     convert to the fully public form of ownership                                                        cash and 50% in stock
                                                                                                         $410 million was raised in the conversion



                                                                                                                                                      Page 14
                  Benefits of Simultaneous Transactions

 Ability to Significantly Help Manage Long-Term Capital Position.


 Ongoing Performance Ratios Enhanced.


 Opportunity to Acquire Additional Management.


 Franchise Building Transaction.


 Larger Market Capitalization and Increased Liquidity Could Lead to Trading Multiple
  Expansion.


                                                                                   Page 15
                                                                                                 First Niagara Financial (NY) completed
                                         Timeline of Simultaneous Transactions
                          First Federal Bankshares (IA) underwent
                          a 2nd step conversion and simultaneous
                                                                                                 a simultaneous 2nd step with acquisition
                                                                                                 of Finger Lakes Bancorp for a
                          acquisition of Mid-Iowa Financial Corp                                 combination of stock and cash.
                                                                                                 First Niagara Financial (NY) completed
                          in a cash transaction.
                          First Federal Bankshares (IA) underwent                                   a simultaneous 2nd step with acquisition
                          a 2nd step conversion and simultaneous                                    First Niagara Financial (NY) completed
                                                                                                    of Finger Lakes Bancorp for a
                                                                     Waypoint Financial (PA) completes a
                                                                                                    a simultaneous 2nd step with acquisition
                          First Federal BanksharesFinancial Corp
                          acquisition of Mid-Iowa (IA) underwent                                    combination of stock and cash.
                                                                     second step while simultaneously                          Pending. Provident Bancorp (NY)
                                                                                                    of Finger Lakes Bancorp for a
                          a 2nd step conversion and simultaneous
                          in a cash transaction.
                                                                                                    his was the
                                                                     acquiring York Financial. Tcombination of stock and cash. announces a simultaneous 2nd step with
                          acquisition of Mid-Iowa Financial Corp
                                                                                   which the "adjusted
                                                                     first deal inFinancial (PA) completes a
                                                                     Waypoint                                                  acquisition of E.N.B. Holding Company
Dime Community (NY)       in a cash transaction.
                                                                                          was used.
                                                                     minimum" featuresimultaneously
                                                                     second step while                                         Pending. Provident Bancorp cash.
                                                                                                                               for a combination of stock and(NY)
completes first
simultaneous conversion                                              acquiring Financial (PA) T his was the
                                                                     WaypointYork Financial. completes a                       announces a simultaneous 2nd step with
and acquisition of (NY)                                              first deal in while the "adjusted
                                                                     second step which simultaneously                          acquisition of E.N.B. Holding (NY)
                                                                                                                               Pending. Provident Bancorp Company
Dime Community
Conestoga first                                                      acquiring York Financial. T his was the
                                                                     minimum" feature was used.                                announces a simultaneous 2nd step with
                                                                                                                               for a combination of stock and cash.
completes Bancorp.
                                                                     first deal in which the "adjusted                         acquisition of E.N.B. Holding Company
Dime Community (NY)
simultaneous conversion
                                                                     minimum" feature was used.                                for a combination of stock and cash.
completes first of
and acquisition
simultaneous conversion
Conestoga Bancorp.
and acquisition of
Conestoga Bancorp.
June 1996                  Nov 1998      Apr 1999                     Oct 2000      Nov 2000                    Jan 2003      Mar 2003        Jul 2003      Jul 2003


June 1996                  Nov 1998      Apr 1999                     Oct 2000      Nov 2000                    Jan 2003      Mar 2003        Jul 2003      Jul 2003

June 1996                  Nov 1998      Apr 1999                     Oct 2000      Nov 2000                    Jan 2003      Mar 2003        Jul 2003      Jul 2003
                          Seacoast (MA) completes first                                                        Pending. Keystone Savings Bank (PA)
                          simultaneous transaction (standard                                                   announces simultaneous conversion and
                          conversion) using stock as consideration                                             acquisition of First Colonial in an all
                          to acquire Sandwich Co-Operative.
                          Seacoast (MA) completes first                                                        Pending. In anticipation of the
                                                                                                               stock deal. Keystone Savings Bank (PA)
                          simultaneous transaction (standard                                                   conversion, First Colonial stock trades
                                                                                                               announces simultaneous conversion and
                          Seacoast (MA) completes first
                          conversion) using stock as consideration                                             acquisition of premium to Bank (PA)
                                                                                                               at a significantFirst Colonialdeal value.
                                                                                                               Pending. Keystone Savingsin an all
                          simultaneous transaction (standard
                          to acquire Sandwich Co-Operative.                                                    announces simultaneous conversion and
                                                                                                               stock deal. In anticipation of the
                          conversion) using stock as consideration                                             acquisition of First Colonial in an all
                                                                                                               conversion, First Colonial stock trades
                          to acquire Sandwich Co-Operative.        Bank Mutual (WI) converts to a Mutual                                    Pending.
                                                                                                               at a significant premium to deal value. New Haven Savings Bank
                                                                                                               stock deal. In anticipation of the
                                                                   Holding Company while simultaneously                                     (CT announces the first simultaneous
                                                                                                               conversion, First Colonial stock)trades
                                                                   acquiring First Northern for a mix of                                    full value.
                                                                                                               at a significant premium to dealconversion to involve two targets.
                                                                   Bank and cash. Shares given to Mutual
                                                                   stock Mutual (WI) converts to aFirst                                     Pending. will acquire Connecticut
                                                                                                                                            New HavenNew Haven Savings Bank
                                                                   Northern stockholders were not offered
                                                                   Holding Company while simultaneously                                     Bancshares for all cash and Alliance
                                                                                                                                            (CT ) announces the first simultaneous
                                                                   to Bank Mutual depositors in theMutual
                                                                   Bank Mutual (WI) converts tomix of
                                                                   acquiring First Northern for a a                                         Bancorp New England for up to
                                                                                                                                            Pending.ofNew to involve two Bank
                                                                                                                                            full conversion Haven Savings targets.
                                                                   conversion.
                                                                   Holding Company while simultaneously
                                                                   stock and cash. Shares given to First                                    New stock.
                                                                                                                                            100%announces the first simultaneous
                                                                                                                                            (CT ) Haven will acquire Connecticut
                                                                     acquiring First Northern for a mix of
                                                                                                                                                                          Page 16
                                                                                                                                            full conversion all involve two targets.
                                                                     Northern stockholders were not offered                                 Bancshares for to cash and Alliance
                       Current Conversion Environment
 Over the past year thirteen conversions have been completed, six of which were second step
  transactions.
      The First Niagara transaction was the largest 2nd step transaction ever. Institutional demand for
       the First Niagara deal was strong.
      New Haven Savings Bank is the largest and most complex conversion ever. Total number of
       shares assumed at the Super Maximum offering is 85,962,500 or $859.6M. New Haven is
       simultaneously acquiring Connecticut Bancshares Inc. and Alliance Bancorp of New England Inc.

 Second step conversion transactions are favorable during strong MHC trading markets in order to
  get the highest exchange ratio possible for minority shareholders. As of October 9, 2003, the
  SNL MHC Index has appreciated 60.1% for the last 12 months, and the top ten MHC’s are trading
  at median multiples of 28.5x earnings, and 233.5% of book.

 Recent conversions have performed well in the aftermarket, with conversions completed within
  the last 12 months trading at an average of nearly 60% above their IPO price.

 Appraisal values for conversions are at an all time high, with many recent conversions being
  priced as the most “expensive” ever.
 Providing guidance on pricing to potential institutional investors has become critical to the
  success of large second step transactions.

                                                                                                           Page 17
                     Current Conversion Environment

   Bank Mutual’s current 2nd Step transaction is being resolicited after demand was higher than
    anticipated.

   Bank Mutual’s appraiser increased the valuation by 15% to $410.6M at the Super Max after
    the offering period ended to reflect both the level of interest in the offering and the increase in
    the pricing of the valuation peer group.

   At the new “Super-Max” appraisal level, Bank Mutual would be the largest 2nd Step
    transaction ever.

   Clifton Savings Bank recently had it’s appraisal increased by the OTS by 67%. The “Super-
    Max” price to pro forma book would be 83.9%, making it the most “expensive” standard
    conversion ever.

   Northwest Bancorp has recently completed an “incremental” offering of shares representing
    ownership of the MHC, shifting additional ownership to minority shareholders and raising $115
    million in capital.

   This was the first significant transaction of this type, and gives MHC’s another option to raise
    capital without doing a 2nd Step transaction.

                                                                                                          Page 18
                                       Recent Conversion Environment

                                                                      IPO       Gross     IPO      IPO    10/7/03   10/7/03         Price Chg
Company                            Ticker   State       Type         Date    Proceeds    Price     P/B      Price      P/B          Since IPO
                                                                                 ($M)
                                                                                                                              (1)
ASB Holding Co.                    ASBH     NJ          MHC       10/03/03      $16.7   $10.00   155.0%   $17.00    263.6%             70.0%
Synergy Financial Group            SYNF     NJ          MHC       09/18/02      $14.5   $10.00    96.0%   $31.95    269.9%            219.5%
Minden Bancorp                     MDNB     LA          MHC       07/02/02       $6.5   $10.00    87.1%   $17.40    139.9%             74.0%
New England Bancshares             NEBS     CT          MHC       06/04/02       $9.2   $10.00    93.6%   $17.60    151.7%             76.0%
Partners Trust Financial           PRTR     NY          MHC       04/04/02      $64.0   $10.00    92.3%   $24.17    200.1%            141.7%
 Medians                                                                                          93.6%   $17.60    200.1%             76.0%
                                                                                                                              (1)
Community First Bancorp, Inc.      CFBC     KY         Standard   06/27/03       $2.8   $10.00   67.3%    $12.40     83.4%             24.0%
Provident Financial Svcs., Inc.    PFS      NJ         Standard   01/16/03     $596.2   $10.00   76.2%    $19.90    140.2%             99.0%
CCSB Financial Corp.               CCFC     MO         Standard   01/09/03       $9.8   $10.00   67.2%    $13.85     89.8%             38.5%
                                                                                                                              (1)
Rantoul First Bank                 RFBK     IL         Standard   04/02/03       $1.9   $10.00   58.5%    $13.00     76.0%             30.0%
Atlantic Liberty Financial Corp.   ALFC     NY         Standard   10/23/02      $17.1   $10.00   74.1%    $19.75    132.4%             97.5%
TierOne Corp.                      TONE     NE         Standard   10/02/02     $220.8   $10.00   71.2%    $22.10    141.7%            121.0%
Monarch Community Bncp             MCBF     MI         Standard   08/23/02      $23.1   $10.00   66.2%    $14.95     96.6%             49.5%
First PacTrust Bancorp             FPTB     CA         Standard   08/23/02      $63.5   $12.00   76.2%    $20.70    112.9%             72.5%
Reserve Bancorp                    RSVB     PA         Standard   04/08/02       $7.6   $10.00   66.3%    $17.25    102.7%             72.5%
Heritage Bancshares                HRGB     TX         Standard   02/26/02       $4.9   $10.00   62.5%    $13.10     78.2%             31.0%
 Medians                                                                                         67.3%    $16.10     99.7%             61.0%
                                                                                                                              (1)
Jefferson Bancshares               JFBI     TN         2nd Step   07/02/03      $66.1   $10.00    91.7%   $14.70    137.9%             47.0%
First Niagara Financial Group      FNFG     NY         2nd Step   01/17/03     $410.0   $10.00   102.6%   $15.41    142.0%             54.1%
Wayne Savings Bancshs, Inc.        WAYN     OH         2nd Step   01/09/03      $20.4   $10.00    86.5%   $14.41    124.4%             44.1%
Sound Federal Bancorp              SFFS     NY         2nd Step   01/07/03      $77.8   $10.00   101.0%   $15.84    150.1%             58.4%
Bridge Street Financial, Inc.      OCNB     NY         2nd Step   01/06/03      $15.1   $10.00    90.2%   $14.01    114.9%             40.1%
Citizens South Banking             CSBC     NC         2nd Step   10/01/02      $52.6   $10.00   111.4%   $14.86    139.3%             48.6%
Brookline Bancorp                  BRKL     MA         2nd Step   07/10/02     $337.2   $10.00    95.4%   $15.46    144.9%             54.6%
Willow Grove Bancorp               WGBC     PA         2nd Step   04/04/02      $64.1   $10.00    95.3%   $16.31    149.1%             63.1%
 Medians                                                                                          95.4%   $15.14    140.7%             51.4%
(1)
      Derived from pro forma data in the Prospectus.


                                                                                                                                     Page 19
                     Strategic Options for Public Banks/Thrifts

            Standard Conversions                                               Second Step Conversions
                    Median Median                                                             Median Median
                 Pro Forma   IPO No. of No. Since                                          Pro Forma   IPO No. of No. Since
                   IPO P/B   Pop Deals Acquired                                              IPO P/B   Pop Deals Acquired
1992                   50.6  18.6   49         38              1992                               NA     NA    0        NA
1993                   60.0  27.5   71         54              1993                               NA     NA    0        NA
1994                   65.2  12.5   71         53              1994                              76.7    13    2          2
1995                   68.2  15.6   81         42              1995                              80.4    8.3   5          3
1996                   71.1   9.8   63         33              1996                              76.8    6.2   7          5
1997                   72.9  42.2   35         14              1997                              93.8  23.4    7          4
1998                   76.3  28.1   40         20              1998                             106.6    6.3  11          3
1999                   64.0   8.1   18          8              1999                              74.4   -0.3   2          0
2000                   54.0  10.0   11          2              2000                              76.8    6.7   3          1
2001                   58.5  20.8   10          0              2001                              81.2  22.8    2          0
2002                   68.7  22.8    6          0              2002                              95.4    9.5   3          0
YTD 2003*              67.3  20.0    4          -              YTD 2003*                         91.7  12.0    5          -
 TOTALS                           459         264               TOTALS                                        47         18


                                             Mutual Holding Companies
                                                Median
                                        Fully-Converted Median
                                             Pro Forma    IPO No. of No. Since No. completing     No. that
                                               IPO P/B    Pop Deals Acquired         2nd Step Remutualized
                   1992                            45.2   35.0   10          5             10            0
                   1993                            56.8   40.0   13          7             10            0
                   1994                            64.3    7.5   18          1             13            1
                   1995                            63.8   10.0    8          4              6            0
                   1996                            67.5   20.6    2          0              0            0
                   1997                            69.6   28.1    4          0              1            1
                   1998                            69.8   12.2   14          0              5            4
                   1999                            57.7    1.3    9          0              2            1
                   2000                            44.3    2.5    4          0              0            0
                   2001                            59.5   33.4    3          0              0            0
                   2002                            65.4   26.2    4          0              0            0
                   YTD 2003*                       80.7   62.0    1          0              -            -
                    TOTALS                                       90         17             47            7
                                                                                                                         Page 20
           Strategic Options for Public Banks/Thrifts




              Community Bank/Thrift



De Novo/Internal
    Growth           Become an
                      Acquiror
                                         Sell




                                                  Page 21
                            What Investors are Looking For In
                            Public Bank/Thrift Stocks
    To state the obvious, investors look for those institutions with an ability to
                             build Shareholder Value!
What Investors Find Attractive:

   High ROE                                                  Proximity to large acquirers
   Consistent above average earnings and revenue growth      Capital Strength
   Niche businesses                                          Solid Management Team
   Businesses which are tough to replicate or have high        Credibility/integrity
    hurdle rates for entry
                                                                Consistency of earnings & business strategy
   Strong markets, demographics and growth projections
   Strong core deposit base, solid loan book                   Sustainability of earnings

   Credit quality history (No credit time bombs)               Quality of earnings

   Healthy cross-sell success across its businesses            Corp. Governance/Board Oversight
                                                                Sound Acctg. Standards & Practices




                                                                                                      Page 22
      Building Shareholder Value




Four separate, complementary approaches
 must be simultaneously pursued to build
           Shareholder Value.




                                           Page 23
                    First: ROE
 Push Return on Equity to consistently exceed the cost of capital.
 Requires focus on ROA (operating strategies) and equity leverage strategies.


         Interest                                                 Non-
         Income                                                Interest
                                                               Income




   Overhead                                                               Interest
    Expense                                                               Expense




           Provision                                            Taxes
                                                                                     Page 24
         Equity Leverage Strategies


 Dividend Policy

 Stock Repurchases

 Acquisition (banks and/or bank-branches)

 Diversification into Non-Banking through Cash Acquisition

 “Arbitrage”

 Internal Growth




                                                              Page 25
                  Second: Adopt “Big Picture” Strategy

 There are only two successful strategies for community banks and thrifts.
  Always have both as part of an overall strategy:

    1. Balanced Growth and Profitability
           achieve ROA in top tier of peer group
           achieve asset growth sufficient to keep capital leveraged at the targeted level


     2. Sell

 From a financial point of view, a commitment to master Strategy 1 can only
  be justified when the present value of anticipated future benefits (stock price
  and dividends per share) exceeds the current value of Strategy 2.
  Thus, strategy 2 becomes the benchmark. Beware the trap!




                                                                                              Page 26
                  Third: Stock Price Perspective

     Stock Price derives from perception regarding future earnings and growth rates
      in absolute terms and relative to other investment opportunities.
      Perception Drivers Include:
1.    Industry trends/outlook/attractiveness
2.    Demographic dynamics of geographic markets served
3.    Lines of business/business designs/target market segments
4.    Brand strength/weakness
5.    Past financial performance/trends/volatility
6.    Leadership and management
7.    Economic trends/outlook
8.    Takeover vulnerability/attractiveness
9.    Owner/investor composition/concentration
10.   Competitive advantage(s)/disadvantage(s); value propositions; business design
11.   Core competencies
12.   Corporate culture; ability to attract and retain superior people
13.   Poor/negatively perceived corporate communication

                                                                                      Page 27
              Fourth: Corporate Culture Perspective



 This perspective is based upon the premise that exceptional
  leadership at all levels of an organization builds the strong
  positive corporate cultures which are essential in attracting and
  retaining the special people needed to build loyal, profitable
  customer relationships which, in turn produce the continuous
  cash-flow which create shareholder value.




                                                                      Page 28
                                M&A Trends --
                                Number of Transactions

 60
                                 52
 50                                                                44
                     40
 40                        32
                                            35         35                                                          annualized
          32                                                  31        30
               28                                                             29
 30                                               23                                    26                            24
                                      22                                                     22                              23
                                                                                                    20 19        21
                                                                                   18
 20
                                                                                                            12
 10

   0
        1993        1994        1995       1996        1997        1998      1999       2000       2001     2002      2003

                                       Banks                                                      Thrifts


As of October 7, 2003

                                                                                                                                  Page 29
                          M&A Trends --
                          Price to LTM EPS

 30x

 25x

 20x

 15x

 10x

  5x

  0x
         1993      1994   1995   1996   1997   1998   1999   2000   2001   2002   2003

                             Banks                                   Thrifts
As of October 7, 2003

                                                                                         Page 30
                        M&A Trends --
                        Price to Book Value

300%

250%

200%

150%

100%

 50%

  0%
         1993       1994   1995   1996   1997   1998   1999   2000     2001    2002   2003

                              Banks                                  Thrifts
As of October 7, 2003

                                                                                             Page 31
                          M&A Trends --
                          Premium to Core Deposits

25%

20%

15%

10%

 5%

 0%
        1993       1994    1995   1996   1997   1998   1999   2000     2001    2002   2003

                              Banks                                  Thrifts
As of October 7, 2003

                                                                                             Page 32
               M&A Decision Process


 Does my Business Plan Maximize Value?
 Does my Business Plan Create Future M&A Value?
 Do Those Values Exceed Today’s M&A Value?
 Does an Acquiror’s Stock Offer Superior Growth and Double Dip
  Potential?
 How Would an Acquisition Affect my Employees, Customers and the
  Community?




                                                                  Page 33
               Buyer Motivations

 Deploy Excess Capital
 Grow Net Income and EPS Through Synergies
 Improvement of Efficiency Ratio
 Enhance Products and Services Offered
 Increase Franchise Value
 Quicker Means of Developing Meaningful Shareholder Value
 Means of Acquiring More Management Talent
 Attract Stronger Levels of Revenue Growth as a Larger Institution
 Flexibility for Future Transactions
 Reduce Competition

                                                                      Page 34
               Seller Motivations

 Concern About the Ability to Grow Earnings and Market Value
 Issues of Management Succession
 Age of Board and/or Management Causes Search for Exit Strategy
 Proactive Stockholders Seeking Accelerated Returns
 Performance and/or Regulatory Challenges for Institution
 Disinterest in Listing Stock on an Exchange and Dealing with
  Public Company Demands
 Overwhelming Need for Larger Bank Resources – Technology;
  Credit Risk Management, etc.
 Competitive Threats


                                                                   Page 35
 Factors That Affect the M&A Market


 Level of Interest Rates
 Inflation Outlook
 Acquiror Stock Valuations
 Acquiror Motivations
 Market Dynamics
   For Buyers
   For Sellers
 Pricing Trends

                                      Page 36
                    Corporate Summary

Ryan Beck has maintained its tradition of excellence for
nearly 60 years

   Founded in 1946 by John J. Ryan as a brokerage firm specializing in municipal bonds, the
    tradition of excellence and service that started over a half century ago is still the foundation
    of our business today – meeting client goals and objectives is our primary focus.

   The firm initiated specialized financial institution advisory services in the 1960’s, and has
    maintained this industry focus in its investment banking, research, trading and market
    making areas.

   In April 2002, the firm significantly expanded its scope and distribution capabilities through
    an acquisition that added additional capital markets-related businesses and increased its
    private client group fivefold.




                                                                                                       Page 37
                          Corporate Summary
The firm is organized around four key areas:


           Investment                                   Capital       Private Client
             Banking             Research                                 Group
                                                        Markets



         20+ investment      15+ professionals     60 professionals   Nearly 500
         bankers                                                      financial
                             Financial             Market maker in    consultants
         Investment          Institutions &        over 700 equity    focused on
         Banking Groups:     General Markets       and debt           serving over
                             Research              securities         150,000 high
         Financial                                                    net worth client
         Institutions        Nearly 100            Cover 1,000+       accounts
                             companies under       institutional
         Middle Market       coverage              accounts           $18 billion
                                                                      under
         Public Finance      Daily distribution,   Equity & Fixed     management
                             annual investor       Income Trading
                             conferences,                             Provide new
                             management road                          and innovative
                             shows                                    investment
                                                                      ideas to clients
                             Investment
                             Strategy:
                             Joseph Battipaglia
                             Kevin Caron



                                                                                         Page 38
                     Financial Institutions Group
Providing custom solutions for all clients

   We are client driven. Ryan Beck strongly believes in developing and maintaining long-
    term relationships and alliances with our clients.

   The Financial Institutions team has well over 200 combined years of industry
    experience through both good and bad market cycles.

   To meet clients’ investment banking needs, Ryan Beck offers public and private equity
    and debt financing, merger and acquisition services, and a full complement of other
    corporate finance advisory services including fairness opinions, due diligence
    assistance and takeover and anti-takeover strategies. The firm also is a leading
    specialist in mutual-to-stock conversions, including standard conversions, MHC
    reorganizations and second-step transactions.

   Ryan Beck’s investment banking relationships are best served by providing informed
    and creative insights in our advisory assignments, as well as the highest quality
    execution in market driven, relationship-oriented engagements.

   The firm actively provides continuous support to its public clients through research,
    distribution and market making activities.



                                                                                            Page 39
                                      Financial Institutions Group
Recent Financial Institutions Group Transactions

        Pending                        Pending                        Pending                          August 25, 2003               June 27, 2003




             COMMON STOCK                   COMMON STOCK                   COMMON STOCK                       7,255,520 Shares
           Price $10.00 per Share         Price $10.00 per Share         Price $10.00 per Share              COMMON STOCK
                                                                                                          Price: $15.85 per Share          2,875,000 Shares
                                            Full Conversion with                                                                          COMMON STOCK
         Second Step Transaction           Concurrent Acquisition       Second Step Transaction             Incremental Offering       Price: $20.75 per Share
                                             of Two Institutions                                             of Common Stock



                                       April 30, 2003                 February 20, 2003                February 10, 2003             January 27, 2003
       May 31, 2003

                                        Sky Financial Group, Inc.
                                             Bowling Green, Ohio

                                                 has acquired                                                                               Bluefield, Virginia
         New Bedford, Massachusetts                                                                        1,080,000 Units
                                                                     Resource Bankshares Corporation
                                                                                                        CONSISTING OF ONE
                  has acquired                                                                          SHARES OF COMMON                 has signed a definitive
                                                                            800,000 Shares                                               agreement to acquire
                                                                                                       STOCK & ONE WARRANT
                                                                           COMMON STOCK
       Bay State Bancorp, Inc.                                          Price: $21.50 per Share
                                                                                                           Price $10.75 per Unit     Commonwealth Bank
           Brookline, Massachusetts           Highland Hills, Ohio                                                                         Richmond, Virginia


       January 17, 2003                January 17, 2003               January 8, 2003                                                November 12, 2002
                                                                                                        December 31, 2002

                                                                                                          NSB Holding Corp.
                                                                                                           Staten Island, New York

             Lockport, New York             41,000,000 Shares               2,040,816 Shares                    has acquired
                                            COMMON STOCK                   COMMON STOCK                                                    960,000 Units
                                          Price $10.00 per Share        Price: $10.00 per Share                                        CONSISTING OF ONE
                  has acquired
                                                                                                                                        SHARE OF COMMON
                                         Second Step Transaction                                                                      STOCK & ONE WARRANT
       Finger Lakes Bancorp, Inc.       Subscription, Community &      Second Step Transaction
                  Geneva, NY                                           Subscription & Community              Avenel, New Jersey
                                           Syndicated Offering                                                                           Price: $8.25per Unit
                                                                                Offering




                                                                                                                                                                   Page 40
       Key Contact Information
FIG Investment Banking Offices:

Headquarters             Boston               Philadelphia        West Palm Beach       Richmond
220 So. Orange Avenue    183 State Street     20 Ash Street       222 Lakeview Ave.     700 E. Main St.
Livingston, NJ           Boston, MA           Conshohocken, PA    West Palm Beach, FL   Richmond, VA
07039                    02109                19428               33401                 23219

Chicago                  New York
70 West Madison Street   380 Madison Avenue
Chicago, IL              New York, NY
60602                    10022

Professional                          Email Address                             Direct Number
FIG Investment Banking

Blair Brantley                        blair.brantley@ryanbeck.com               804-213-4303
Christopher Choate                    chris.choate@ryanbeck.com                 804-213-4302
Mark B. Cohen                         mark.cohen@ryanbeck.com                   212-651-2725
Michelle Darcey                       michelle.darcey@ryanbeck.com              610-567-1909
David Downs                           david.downs@ryanbeck.com                  973-597-6030
Christopher Gastelu                   chris.gastelu@ryanbeck.com                973-597-6041
Kristi Lutes                          kristi.lutes@ryanbeck.com                 973-597-6037
Bruce Miller                          bruce.miller@ryanbeck.com                 973-597-6045
Paul O’Connor                         paul.o’connor@ryanbeck.com                312-269-0346
Gary Penrose                          gary.penrose@ryanbeck.com                 804-213-4301
Ben Plotkin                           ben.plotkin@ryanbeck.com                  973-597-6025
Michael Rasmussen                     michael.rasmussen@ryanbeck.com            973-597-6046
Dwayne Safer                          dwayne.safer@ryanbeck.com                 973-597-6028
Michael Schechter                     michael.schechter@ryanbeck.com            973-597-6026
Fred Schluter                         fred.schluter@ryanbeck.com                617-589-9004
Robin Suskind                         robin.suskind@ryanbeck.com                973-597-6036
Robert Troke                          robert.troke@ryanbeck.com                 973-597-6031


Bank Services Group
Guy Malaby                            guy.malaby@ryanbeck.com                   973-597-5777
Scot Orzillo                          scot.orzillo@ryanbeck.com                 973-597-6833
                                                                                                          Page 41

								
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